Fuel subsidy was a major talking point for Nigeria's presidential candidates in the build up to the country's 2023 general elections. Despite disagreeing on many policies, the three major presidential aspirants were united on this subject, and for good reason.
The Nigerian National Petroleum Company (NNPC) disclosed that the Nigerian government spent $10 billion on fuel subsidy in 2022. That's more than the country spent on education and health combined.
So it was not entirely surprising to hear the newly elected president announce the end of fuel subsidy at his inauguration. That announcement, criticised as ill-timed in some quarters, immediately sent prices soaring. As at press time, petrol was selling for between ₦500 and ₦600 across the nation as against ₦185 before the president's announcement.
The immediate impact has been felt in industries like transportation and logistics that are heavily dependent on fuel.
Two weeks ago, Bolt increased its minimum fare across the nine cities where it operates. Yet, ride-hailing drivers have refused the increase, demanding a 200% increase in ride-hailing fares.
A food vendor who owns a delivery bike explained that having implemented a price increase earlier in the year, she is wary of adding extra costs that could alienate her customers. Consequently, she has restricted her delivery services to close locations.
While some logistics services responded with immediate price hikes, quick-delivery service, Glovo has decided to observe the impact of higher fuel prices on their operations before making a decision.
"Generally, our operations have continued as is but we envision an increase in cost of delivery and cost of goods from our partners due to the overall increased cost of operations. We are yet to [increase prices officially] and considering it’s only been a few days, we are yet to ascertain the precise impact on our customers," explains Lorenzo Mayol, General Manager for Glovo Nigeria.
He adds that delivery times have increased by two minutes, an admittedly negligible rise. Beyond its impact on the cost of logistics services, concerns have been raised over its potential effect on the quick delivery segment. Many customers desire quick delivery but it is likely one of the first expenses they will eliminate as they try to cope with rising prices and stagnant incomes.
However, Mayol is optimistic, declaring that on-demand delivery is here to say. In the past year, there has been a 76% increase in the number of people ordering groceries on the Glovo app, while businesses make more revenue from the app.
"There continues to be a high demand from partners and customers alike despite rising inflation, as customers have grown accustomed to the convenience of ordering from their homes. Regardless of the scarcity and increased cost of living, there are huge potentials for this trend to continue in Nigeria."
Couriers are crucial to Glovo's operations and Mayol shares that the company has plans to ensure that couriers get the most benefit from Glovo. The startup is currently rolling out The Couriers Pledge, a programme that aims to improve the working conditions of its couriers, while increasing the benefits of working with Glovo.
The Couriers Pledge launched in 2017 and is already present in 17 countries, with the startup looking to have a presence in all countries where it operates by December 2023.
The Couriers Pledge is set to launch in Nigeria this June, bringing the number of African nations on the list to five, with Kenya, Morocco, Ghana, and Uganda the other four. Mayol opines that wages in countries where the programme has been implemented have increased by ten per cent.
While acknowledging that the fuel subsidy will lead to higher operating costs, Mayol is confident that businesses that depend on logistics services will come up with innovative strategies to serve customers.